Herc Rentals PESTLE Analysis

Global and regional trade policies, including tariffs, directly affect Herc Rentals by influencing the cost of acquiring new equipment and shaping the broader economic environment. These policies can impact supply chains and the price of machinery, ultimately affecting rental rates and demand.

While a temporary reduction in US-China trade tariffs in early 2025 provided some breathing room, the persistent uncertainty surrounding these trade agreements continues to cast a shadow over the domestic economy. This ongoing volatility can translate into fluctuations within the equipment rental sector, as businesses adjust their capital expenditure plans based on trade outlooks.

Government infrastructure spending remains a significant boon for Herc Rentals, with initiatives like the Bipartisan Infrastructure Law continuing to drive demand for rental equipment. This legislation is expected to fuel approximately $1.2 trillion in spending over ten years, directly benefiting companies like Herc Rentals by creating a robust pipeline of commercial and industrial construction projects.

Regulatory compliance, particularly concerning environmental standards, necessitates ongoing fleet modernization. For instance, stricter emissions mandates for diesel engines, enforced by bodies like the EPA, could increase operational costs for older equipment and require strategic investment in newer, compliant machinery. This focus on compliance is crucial for maintaining operational efficiency and market competitiveness.

Trade policies and political stability in key North American markets directly influence investor confidence and project initiation. Herc Rentals anticipates that favorable political conditions will support its objective of capitalizing on an estimated 5% to 7% increase in North American construction spending projected for 2025, underscoring the link between political predictability and sector growth.

The demand for Herc Rentals' equipment is closely tied to the health of the construction and industrial markets. Both residential and non-residential building projects, along with ongoing industrial activities, fuel the need for rental equipment. For instance, in 2024, the U.S. construction industry saw significant activity, with non-residential construction contributing substantially, though projections for 2025 suggest a potential moderation in this segment.

Looking ahead to 2025, a shift is anticipated. While non-residential construction growth is expected to moderate, the residential construction sector may experience an uptick. This changing landscape presents both opportunities and challenges for equipment rental companies like Herc Rentals, which caters to a broad spectrum of clients including general contractors, specialized industrial firms, and those involved in large-scale infrastructure development.

The economic landscape for Herc Rentals in 2024-2025 is characterized by a mixed outlook. While the broader North American equipment rental market is projected for moderate growth, reaching an estimated $87.5 billion in 2025 with a 5.2% expansion in the U.S. construction and general tool rental sector, localized growth has been constrained by a 'higher-for-longer' interest rate environment throughout 2024.

However, anticipated interest rate cuts in 2025 could stimulate project development, benefiting the rental sector. Herc Rentals is strategically targeting large-scale projects to mitigate the impact of slower growth in smaller segments. The trend towards renting over owning equipment, driven by higher financing costs and a preference for CAPEX-light models, is a significant tailwind, with rental market penetration reaching 57% in 2024.

Inflation remains a key challenge, impacting operational costs, but Herc Rentals has demonstrated pricing power, increasing rental prices by 3.2% year-over-year in 2024, which supported record equipment rental revenue.

Herc Rentals actively fosters a diverse and inclusive workplace as a core component of its social responsibility. This commitment extends to creating an environment where all employees feel valued and respected, contributing to a stronger organizational culture and enhanced employee engagement.

The company's dedication to supporting veterans and the military-connected community has been notably recognized. For 2025, Herc Rentals earned the prestigious VETS Indexes 4-Star Employer designation, underscoring its proactive efforts in veteran recruitment, retention, and overall support within its operations.

Herc Rentals' focus on its people is evident in its commitment to employee well-being and development, leading to its 2025 Great Place to Work certifications in the U.S. and Canada. This positive work environment is crucial for attracting and retaining skilled talent, particularly in demanding trade roles.

The company also demonstrates strong community engagement, highlighted by its 2024 Corporate Citizenship Report and the introduction of Volunteer Time Off (VTO) benefits. Furthermore, Herc Rentals' dedication to supporting veterans earned it a 4-Star Employer designation from VETS Indexes in 2025, showcasing its commitment to diverse workforce inclusion.

Safety remains a paramount concern, with Herc Rentals achieving a Total Recordable Incident Rate (TRIR) of 0.80 in 2023, significantly outperforming industry averages. This focus on safety not only protects employees but also enhances the company's reputation and client trust.

Herc Rentals is prioritizing the acquisition of equipment featuring advanced emission control systems and improved fuel efficiency. This strategic investment directly addresses growing customer preferences for environmentally responsible rental options and helps mitigate the company's operational carbon footprint.

Herc Rentals is actively integrating advanced technologies to enhance customer experience and operational efficiency. Their ProControl NextGen™ platform, launched in 2022, provides real-time equipment data, while ongoing digital transformation efforts in 2024 focus on improving fleet management through telematics and data analytics.

The company is also prioritizing IoT integration for real-time equipment monitoring and predictive maintenance, with pilot programs underway in 2024. This technological push aims to streamline the rental process, reduce friction, and increase customer satisfaction, evidenced by a rise in online transactions and reduced manual processing in 2023.

Herc Rentals' commitment to technology extends to acquiring equipment with advanced emission controls and improved fuel efficiency, aligning with customer preferences for sustainability. These investments are crucial for maintaining a competitive edge and optimizing operational performance.

The company's increasing reliance on digital systems necessitates significant investment in IT infrastructure and robust cybersecurity measures to protect against evolving threats. In 2024, the global cybersecurity market exceeded $230 billion, underscoring the critical need for Herc Rentals to allocate substantial resources to network security and data protection.

Herc Rentals operates under stringent workplace safety laws and standards, implementing robust Health and Safety Management Systems (HSMS) to ensure compliance and foster a secure environment for its employees. This commitment is demonstrated through ongoing enhancements to safety protocols and a dedicated focus on reducing its Total Recordable Incident Rate (TRIR).

For instance, in 2023, Herc Rentals reported a TRIR of 0.65, a significant improvement from 0.85 in 2022, reflecting their proactive approach to safety management and adherence to evolving regulatory requirements across their operational jurisdictions.

Herc Rentals operates under a complex legal landscape, necessitating strict adherence to contract law, consumer protection, and workplace safety regulations. The company's extensive network of rental agreements, covering diverse equipment and customer types, requires meticulous management to define liabilities and operational standards. Compliance with these contractual obligations is crucial for mitigating financial risks and ensuring smooth business operations.

Herc Rentals is making significant strides in fleet electrification, with 38% of its equipment already being electric or hybrid as of early 2024. This commitment to greener machinery directly addresses environmental concerns and aligns with increasing regulatory pressures and customer demand for sustainable rental options.

Beyond the equipment itself, Herc Rentals is also focusing on operational efficiency through driver training programs aimed at promoting fuel-efficient driving habits. This dual approach of investing in electric/hybrid assets and optimizing existing fleet usage is key to reducing the company's overall carbon footprint and operational costs.

Herc Rentals is actively addressing environmental concerns by focusing on emissions reduction and waste management. The company has achieved a 26% reduction in Scope 1 and 2 GHG emissions intensity against a 2019 baseline, surpassing its initial 2030 target.

Further demonstrating its commitment, Herc Rentals reduced non-toxic waste sent to landfills by nearly 25% compared to 2019. Their fleet is also becoming greener, with 38% of equipment being electric or hybrid as of early 2024, aligning with market demand for sustainable solutions.